Bank Runs in Open Economies and The International Transmission of Panics / Peter M. Garber, Vittorio U. Grilli.

Format:

Book

Author/Creator:

Garber, Peter M.

Contributor:

National Bureau of Economic Research.

Grilli, Vittorio U.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2764.

NBER working paper series no. w2764

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1988.

Summary:

In this paper, we extend the bank run literature to an open economy model. We show that a foreign banking system, by raising deposit rates in the presence of a domestic banking panic, may generate sufficient liquid resources to acquire assets sold by the domestic banking system at bargain prices. In this case, foreign depositors will benefit from the domestic panic. We also show that our simple model is able to generate the spreading of panics. Perhaps not surprisingly, the crucial element in determining the propagation of financial crises is the effect of interest rates on savings decisions.

Notes:

Print version record

November 1988.